A tax return is required to claim an insurance premium credit

If you or a family member enrolled in a qualified health plan offered through a government insurance marketplace, such as HealthCare.gov, you may be eligible for a federal tax credit. The amount of the credit varies depending on your household income and can be claimed on your tax return. Alternatively, you have the option to receive all or part of the credit in advance in the form of payments to your insurer that reduce your health insurance premiums.

Either way, you need to file a federal income tax return. That’s the case even if you’re usually not required to file. In the case of advance payments, failing to file your tax return can prevent you from receiving the credit in future years. [Read more…]

Tax-exempt organizations have an upcoming filing requirement

Tax-exempt organizations are required to file annual reports with the IRS. Those with gross receipts below $50,000 can file an e-Postcard (Form 990-N) rather than a longer version of Form 990.

The deadline for nonprofit filings is the 15th day of the fifth month after the year-end. For calendar-year organizations, the filing deadline for 2015 reports is May 16, 2016.

April is a busy month for taxes

Is your tax return finished? If not, this year you have an extra day – or two – to file. April 18, 2016, is the due date to file your 2015 individual federal income tax return and pay any balance due. If you live in Maine or Massachusetts, you have until Tuesday, April 19, to file and pay.

Here’s why. The normal due date – Friday, April 15 – is Emancipation Day. That’s a holiday in the District of Columbia, so the tax filing deadline shifts to Monday, April 18. However, Monday, April 18, is also a holiday (Patriots Day) in Maine and Massachusetts. That means if you live in either of those states, your deadline moves to April 19. The extended due dates apply whether you file electronically or on paper. [Read more…]

Will rising interest rates affect you?

For almost the entire past decade, interest rates held steady at near-zero levels. Then, in mid-December 2015, the Federal Reserve raised rates by one-quarter percentage point. Market watchers and economists expect further rate increases in the coming months. How will you be affected?

Technically speaking, only the federal funds rate was adjusted in December. That’s the short-term rate that credit-worthy banks and credit unions use to lend each other money. But any interest rate revisions can cause a ripple effect throughout the economy. Accordingly, the Federal Reserve’s actions probably will exert at least a moderate influence over financial choices you make at home and in your business in 2016 and beyond. [Read more…]

Update your tangible property expensing policy

In 2013, the IRS issued regulations clarifying when tangible real and personal business property can be expensed. The regulations provided safe harbors that let you deduct certain costs you’d otherwise have to capitalize. For example, using a de minimis safe harbor, you could elect to deduct individual capital expenditures of $500 or less if your business did not have an “applicable financial statement.” (In general, an applicable financial statement is a financial statement based on a certified audit by an accounting firm.) Effective beginning with 2016 taxable years, this safe harbor has increased to $2,500 per invoice or item. In addition, the IRS says it will not contest similar treatment in audits of earlier years.

Plan for changes to social security

The Bipartisan Budget Act of 2015 made two changes to social security benefit strategies. “File and suspend” was a way for married couples to allow the higher earning spouse to claim benefits at full retirement age but suspend the benefits until a later date. Under the Act, this strategy will no longer be available after April 30, 2016. [Read more…]

The myRA: A new simplified Roth IRA is the latest retirement plan

If you haven’t yet begun saving for retirement, a myRA may be a reason to start. “myRA” is an acronym for “my Retirement Account.” myRAs cost nothing to open, have no fees, and let you start saving with any amount that fits your budget. You can open a myRA even if you have other retirement accounts. Your myRA belongs entirely to you and can be moved to any new employer that offers direct deposit capability. [Read more…]

Major tax deadlines for March

  • March 1 – Due date for farmers and fishermen who chose not to make 2015 estimated tax payments to file 2015 tax returns and pay taxes in full to avoid underpayment penalties.
  • March 15 – 2015 calendar-year corporation income tax returns are due.
  • March 15 – Deadline for calendar-year corporations to elect S corporation status for 2016.
  • March 31 – Payers who file electronically must submit 2015 information returns (such as 1099s) to the IRS.
  • March 31 – Employers who file electronically must submit 2015 W-2 copies to the Social Security Administration.

New rules may limit foreclosures

In the last few years, Fannie Mae and Freddie Mac have been selling many distressed mortgages to private investors instead of going through the process of foreclosure themselves. A number of people have complained that these investors have treated some homeowners roughly.

Now, new government rules have been issued that are designed to restrain investors and give homeowners more of a chance of staying put. [Read more…]

Get the right paperwork to claim charitable deductions

What supporting documentation do you need to claim charitable deductions on your federal income tax return?

In general, you can support monetary contributions of any amount with a cancelled check, credit card statement, proof of payroll deduction, or a receipt from the charity. The paperwork must show the organization’s name and the amount and date of your contribution.

When you contribute cash of $250 or more, get a written acknowledgement from the charity. The receipt must show the name of the charity, the date of your donation, and the amount donated, as well as a description and the estimated value of any nondeductible item (such as a book or dinner) provided to you. [Read more…]

Make time for a conversation with your parents about finances

Discussing finances with your parents may be a talk none of you are eager to tackle. But addressing the topic can benefit your entire family by clarifying your parents’ wishes and enabling you to help establish a joint plan for carrying those wishes to fruition. Here are questions that can start the dialogue. [Read more…]

Be aware of inflation-adjusted 2016 tax numbers

Certain tax numbers are adjusted for inflation each year. This year, many of the numbers are unchanged or change only slightly from 2015 amounts. Here are some of the tax numbers to use in your 2016 tax planning. [Read more…]

Note upcoming tax deadlines

  • February 29 – Payers must file information returns, such as Forms 1099, with the IRS. This deadline is extended to March 31 when the forms are filed electronically.
  • February 29 – Employers must send W-2 copies to the Social Security Administration. This deadline is extended to March 31 for electronic filing.
  • March 1 – Farmers and fishermen who did not make 2015 estimated tax payments must file 2015 tax returns and pay taxes in full to avoid a penalty.
  • March 15 – 2015 calendar-year corporation income tax returns are due.
  • March 15 – Deadline for calendar-year corporations to elect S corporation status for 2016.
  • March 31 – Large employers must furnish Forms 1095-C to employees.

Be aware of these tax deadlines

A new year means tax return filing season has arrived once again. Among the tax deadlines you may be required to meet in the next few months are the following: [Read more…]

Keys to effective cash management

Add cash management to your list of business goals for 2016. Commitment to effective practices and techniques can be the key to keeping your business operating on a sound footing. Some tips:

Reduce lag time. Reducing the time between sending out invoices and receiving payment may take the form of giving incentive discounts to customers who pay early. On the expense side, aim for just-in-time inventory to reduce holding costs. [Read more…]

Standard mileage rates reduced for 2016

  • Business. Starting January 1, the standard mileage rate for driving a vehicle for business purposes is set at 54 cents per mile. That’s down from 57.5 cents in 2015.
  • Medical and moving. The rate for medical and moving mileage decreases from last year’s 23 cents a mile to 19 cents a mile.
  • Charity. The general rate for charitable driving remains at 14 cents a mile.

Tax extender act renews tax breaks

In mid-December, Congress renewed a long list of tax breaks known as “extenders” that have been expiring on an annual basis. This year many of the rules are retroactive to the beginning of 2015, and you can benefit from them as you prepare your 2015 federal income tax return.

In addition, the Protecting Americans from Tax Hikes Act of 2015, which was signed into law on December 18, 2015, makes some of the rules effective through December 31, 2016. Others are effective through 2019, and some are effective permanently. Provisions in the Act also make changes to existing tax rules that were not part of the extenders. All of these changes will affect your tax planning for 2016 and future years. Here’s an overview of selected provisions. [Read more…]

Give financial gifts this holiday season

When planning gifts for children on your holiday list, you might want to think beyond the traditional retail offerings. Consider financial gifts that can bestow benefits for many years to come.

Some financial gift options you might consider: [Read more…]

Customer service: Do your employees walk the talk?

Good customer service leads to repeat sales and referrals, which lead to higher revenues and profits. The result is a stronger, more secure business.

Your sales staff knows this well. Their results are directly affected by customer perceptions. Other em­ployees, such as those in support and back office functions, may not think of themselves as serving the customer. But every employee has an impact, direct or indirect, on customer experience. An incorrect shipment, a late delivery, or a mistake on an invoice, all result in poor service. Make it a goal of your business to meet, and preferably exceed, customer expectations as often as possible. [Read more…]

Make time for some last-minute tax savers

That ticking you hear is the tax clock winding down – quickly. There is only a very short time left to cut your taxes for 2015. Here are moves you can still make before year-end. [Read more…]

Wife shares in pension cost-of-living adjustments

A woman who received part of her ex-husband’s civil service pension at divorce was also entitled to share in his later cost-of-living adjustments, the Kentucky Court of Appeals recently decided.

When the couple divorced, the pension was divided equally between the husband and wife. [Read more…]

Going to jail doesn’t end father’s parental rights

The fact that a father was given a lengthy prison sentence for drug offenses doesn’t automatically mean he should lose his parental rights, says the Kentucky Court of Appeals.

The state had argued that the father’s rights should be terminated due to “abandonment and neglect.” [Read more…]

Wife who hid lottery winnings is a loser in divorce

When you’re going through a divorce, one of the biggest fouls you can commit is trying to hide assets so you can keep them for yourself. It’s usually easy to get caught, and you can be severely punished for not being truthful. [Read more…]

Most divorce documents can be shredded later – but not all

We’ve all heard horror stories about personal privacy and identity theft. That’s why many people shred all their sensitive documents after they no longer need them – including credit card bills, bank statements, older tax documents, and anything with PIN or Social Security numbers.

But what about divorce papers? [Read more…]

Couples are putting ‘social media clauses’ in their prenups

Prenuptial agreements are usually thought of as a way of protecting assets in case a marriage doesn’t work out. But they’re increasingly being used to protect a spouse’s reputation as well.

In the age of social media, it’s very easy for a bitter ex-spouse to humiliate someone in front of family and friends, or even thousands of strangers. [Read more…]

Missing prenup might still be valid

If someone signs a prenuptial agreement but can’t locate the original signed copy years later, it’s possible that it might still be enforced. It’s not a sure thing, but it’s possible, as a couple of recent court cases show.

In one case, a wealthy owner of strip malls and hotels in New York persuaded his fiancée to sign a prenup during a whirlwind three-week engagement by telling her that his dad would “cut him off’ if he didn’t get a prenup. On their honeymoon cruise, the couple ripped up the prenup documents and threw them in the sea. The wife’s original was gone – but the husband kept a photocopy. [Read more…]

Update your beneficiary designations

Are your beneficiary designations up to date? Do you know which accounts have beneficiaries, and whom you’ve designated? It’s easy to lose track. But it’s important to keep them current. Here’s why.

When you designate a beneficiary for an account, that person inherits the assets in the account, regardless of what your will says. That’s why updating your will periodically might not be enough. Typically, you’ll have beneficiaries for each of your IRAs, your 401(k) or other retirement plans, annuities, and insurance policies. [Read more…]

Consider the value of time in business decisions

The “time value of money” is a critical concept in handling personal finances. The same basic premise can be applied in making decisions for your business.

Here’s how it works: Typically, the money you currently have in your hands is worth more than it would be years from now. That’s because you’re able to spend or invest the funds now instead of waiting to receive them. In other words, there’s an “opportunity cost” attached to any delay.

For example, let’s say you’re entitled to a $100 payment. If you receive the $100 now and you’re able to invest it at a 5% annual interest rate, you’ll have $105 after one year. Assuming you don’t need the money for expenses, it will be worth $110.25 after two years, and so on. This amount is known as the “future value” of the money. [Read more…]

Charity scams: IRS issues another warning

The IRS has once again issued an alert for scams relating to fake charities. This time the fraudsters are looking to profit from the severe flooding in South Carolina that led to the declaration of a federal disaster area.

If you’re planning to donate, watch for these signs that a fundraiser isn’t on the up-and-up: [Read more…]

Take your required 2015 distribution

If you’re over 70½ and are required to take distributions from your IRA or other retirement account, remember that you must take your 2015 RMD (required minimum distribution) by December 31. Otherwise you may face a penalty of 50% of the amount not taken. If the 2015 distribution is your first RMD, you have the option of waiting until April 1, 2016, to begin withdrawals.

Insurance enrollment begins this month

Beginning this month, you can sign up for a new 2016 health insurance policy on the health insurance Marketplace. You can also change or renew the policy you purchased during the last enrollment period. Even if your current policy has an automatic renewal feature, you’ll want to verify that you are still eligible for the federal premium tax credit. [Read more…]

2016 filing deadline extended

Next year, you’ll get a few extra days to file your 2015 income tax return. The District of Columbia will be observing Emancipation Day on Friday, April 15, 2016, the usual filing deadline. That moves the filing deadline for 2015 federal income tax returns to Monday, April 18. Residents of Massachusetts and Maine get one more day to file – to Tuesday, April 19 – due to Patriots’ Day.

How to keep your customers satisfied

In some industries, service has become a quaint memory. Customers are often reduced to selecting the provider that costs or annoys them the least. But the golden rule has not been repealed. Pleasing your customers can create a powerful competitive advantage – and a few simple changes may increase your bottom line.

For example, businesses are among the worst offenders of time-wasting annoyances such as long waits on hold. To distinguish your firm from the rest, establish the following customer service policies and procedures. [Read more…]

Give your kids the power of a Roth IRA

Would you like to give your child a head start on smart money habits? Here’s a suggestion: Have the child invest in a Roth IRA. Why? The tax-free compounding of contributions and investment returns over your child’s lifetime is a great wealth-builder. Here’s what you need to know. [Read more…]

Check your 2015 tax payments

Don’t let penalties for underpaid taxes increase your tax bill next April. Check the total you’ve paid in for 2015 through withholding and/or estimated taxes. If you’ve underpaid, consider adjusting your withholding for the final months of the year or increasing your remaining quarterly estimate. If you employ household workers, be sure your calculations include the payroll taxes you’ll owe for them. Remember to include the 3.8% tax on net investment income in your planning too.

Tax filing reminders

  • October 1 – Generally the deadline for businesses to adopt a SIMPLE retirement plan for 2015.
  • October 15 – Filing deadline for 2014 individual tax returns on automatic six-month extension of the April 15 deadline.
  • October 15 – If you converted a regular IRA to a Roth in 2014 and now want to switch back to a regular IRA, you have until October 15, 2015, to do so without penalty.

Understand mutual fund expenses

Are you familiar with the charges imposed by the mutual funds you own? Since fund expenses affect your investment return, understanding the costs is an important step in making sound investment decisions. Here are some common charges you’ll want to know about before you invest.

  • Load. A load is a sales charge imposed by the fund. You might think of it as similar to the fee you pay a broker to purchase a stock. Mutual funds fit in two broad categories: load and no-load.

Load funds include front-end, back-end, and level-load. A front-end load, as the name implies, is charged when you make your initial investment. A back-end load is charged when you sell your investment before a specified period of time has passed. A level-load charges you an ongoing fee (for instance, 1% per year) as long as you own the shares. A no-load fund has no sales charge. Keep in mind that no-load is not the same as no-fee. No-load funds can still charge purchase fees, redemption fees, exchange fees, and account fees. Look for information on fees and charges in a fee table located near the front of a fund’s prospectus under the heading “Shareholder Fees.” [Read more…]

Finish the year with effective tax planning

The fourth quarter is often make-or-break time in sports. Likewise, tax-cutting steps you take in the last three months of the year can transform a financial plan into a bona fide winner.

Late-year tax planning is often a matter of reviewing your inflows and outflows. For instance, income from capital gains can be subject to both capital gains tax and the 3.8% Medicare surtax. To offset capital gains, you might sell investments that have lost value since you purchased them. Net capital losses can be used to reduce ordinary income by up to $3,000. A tax-saving examination of your portfolio is also a good time to rebalance your holdings between asset classes. [Read more…]

Roth re-do deadline approaching

It turns out you can go back after all – at least when it comes to last year’s decision to convert your traditional IRA to a Roth. The question is, do you want to?

You might, if your circumstances have changed. For example, say the value of the assets in your new Roth account is currently less than when you made the conversion. Changing your mind could save tax dollars.

Recharacterizing your Roth conversion lets you go back in time as if the conversion never happened. You’ll have to act soon, though, because the window for undoing a 2014 Roth conversion closes October 15, 2015. Before that date, you have the opportunity to undo all or part of last year’s conversion. [Read more…]

Tax due dates

  • September 15 – Third quarter installment of 2015 individual estimated income tax is due.
  • September 15 – Filing deadline for 2014 tax returns for calendar-year corporations that received an automatic extension of the March 16 filing deadline.
  • September 15 – Filing deadline for 2014 partnership tax returns that received an extension of the April 15 filing deadline.
  • October 1 – Generally, the deadline for businesses to adopt a SIMPLE retirement plan for 2015.
  • October 15 – Deadline for filing 2014 individual tax returns on extension.

Businesses say taxes are a hassle

In a survey of small businesses conducted by the National Small Business Association, 59% of respondents said taxes were more of an administrative burden than a financial one. Most businesses put payroll taxes at the top of the list of taxes with the greatest administrative burden. Payroll taxes also outranked other taxes, such as income, property, and sales taxes, as the top financial burden to businesses.

IRS publishes 2016 HSA contribution limits

The IRS recently announced inflation-adjusted contribution limits for health savings accounts (HSAs) for 2016. HSAs are a combination of a high-deductible health insurance plan and a savings account in which you set aside pretax dollars that can be withdrawn tax-free to pay unreimbursed medical expenses. The 2016 HSA contribution limit for individuals is $3,350; the limit for family coverage is $6,750. You can make a catch-up contribution of an additional $1,000 when you’re 55 or older.

Scammers want to take your vacation

Buyer beware! Both the Better Business Bureau and the Federal Trade Commission have issued warnings about vacation fraud. By some estimates, this type of scam costs travelers over $10 billion each year. How do you know whether you’re dealing with a legitimate travel agent or a huckster? Here are pointers.

  • Do your research. Get contact information for hotels, rental car companies, and airlines; then confirm reservations and prices directly. Research properties on the Internet before you travel. (Is that “five star hotel” really near the beach?) Check out the Better Business Bureau. Although bad companies may not always appear on BBB radar, a history of complaints is a tip-off that you’re dealing with a less-than-reputable firm.
  • Get it in writing. Obtain a copy of the firm’s cancellation and refund policies. Get written confirmation of your travel arrangements. Read the fine print, especially verbiage about availability of travel dates and additional charges.
  • Beware the bait and switch. You don’t want to learn the hard way that “luxury” has an unexpected definition. In one scam, a “luxury” Caribbean cruise booked for dollars a day was actually a six-hour ferry ride. In another, a “luxury” hotel was located next to the city dump. Of course, the travel company will be glad to move you to better accommodations – for a hefty fee.
  • Say “no” to high-pressure sales tactics. If the salesperson says you’re missing the deal of a lifetime and you’re a fool to pass it up, walk away. Reputable firms want your business and will be happy to let you think over an offer.
  • Pay with a credit card. If a company asks for an overnight payment or cash in advance, go elsewhere. Legitimate companies will bill your credit card in the normal course of business. In addition, your card offers travel protection such as accident insurance.

The idea of saving money can be alluring. But remember that “too good to be true” is a cliché for a reason. Don’t let fraudsters take your dream vacation.

Health care law survives Supreme Court challenge

On June 25, the U.S. Supreme Court issued its ruling on the controversial King v. Burwell case.

The main issue in the case was whether federal subsidies could be offered to people who purchased health insurance through the federal health insurance marketplace rather than through a state-run exchange. Under a literal reading of the law, subsidies are allowed through exchanges “established by the state.” It was argued that the wording of the Affordable Care Act (ACA) prohibits subsidies from being granted in states that did not set up their own insurance exchange, but instead defaulted to the federal health insurance marketplace. More than half of the states use the federal exchange. [Read more…]

Do your homework on back-to-school tax breaks

Education tax planning can optimize the available breaks for saving and paying for school expenses. Here are some tips.

Saving for education

  • Section 529 plans include prepaid tuition programs and college savings accounts. Prepaid tuition programs let you buy future tuition credits at today’s rates, while college savings accounts let you set aside funds in an investment account. You get no tax deduction, but you can use the money tax-free for qualified college expenses.
  • Coverdell education savings accounts have some characteristics of Section 529 plans – and a few important differences. Nondeductible annual contributions of $2,000 can be made not only for qualified college costs, but also for many K-12 expenses. Unlike 529 plans, phase-out rules prevent contributions when your income exceeds certain levels.

[Read more…]

Tax filing reminder

July 31 is the deadline for filing 2015 retirement or employee benefit returns (5500 series) for plans on a calendar year.

Refocus your business

Are problems beginning to surface in your business? Have profits been dwindling? Are customers complaining with greater frequency? Are competitors encroaching on your market share? These are warning signs that you’re headed in the wrong direction – and you don’t want to ignore them until it’s too late. Here are suggestions for turning things around.

  • Focus on the money-makers. Perhaps your business has developed products your customers aren’t willing to buy. If so, it may make sense to redirect your company’s available resources. Does that mean you should never create new product lines or expand into new markets? No. But new products must eventually improve the bottom line. If they don’t make money within a reasonable time, refocus.
  • Establish (or reestablish) your brand. Identify what you do best; then tell everyone. Your goal is to educate customers, vendors, and employees on the reasons why your product or service is better than the competition. Be specific. Of course, to remain credible you must back up your claims, so be realistic as well. Win trust by following through.
  • Track results. Once you’re refocused on the money-making segments of your business, keep a close eye on the numbers. Know whether customer complaints are down, cash flow is improving, back orders are declining, and market share is holding steady or increasing. If profits aren’t showing an upward trend, take another look – then adjust and remeasure.

Maximize tax benefits of carryforwards and carrybacks

Although the tax code contains some exceptions, income is generally taxable in the tax year received and expenses are claimed as deductions in the year paid. But “carryforwards” and “carrybacks” have special rules. In this case, certain losses and deductions can be carried forward to offset income in future years or carried back to offset income in prior years, providing tax benefits.

  • Capital losses. After you net annual capital gains and capital losses, you can use any excess loss to offset up to $3,000 of ordinary income. Remaining losses can be carried over to offset gains in future years. The carryforward continues until the excess loss is exhausted.
  • Charitable deductions. Your annual charitable deductions are limited by a “ceiling” or maximum amount, as measured by a percentage. For example, the general rule is that your itemized deduction for most charitable donations for a year can’t exceed 50% of your adjusted gross income (AGI). Gifts of appreciated property are limited to 30% of your AGI (20% in some cases) in the tax year in which the donations are made. When you contribute more than these limits in a year, you can deduct the excess on future tax returns. The carryover period for charitable deductions is five years.
  • Home office deduction. If you qualify for a home office deduction and you calculate your deduction using the regular method, your benefit for the current year can’t exceed the gross income from your business minus business expenses (other than home office expenses). Any excess is carried forward to the next year. Caution: No carryforward is available when you choose the “simplified” method to compute your home office deduction.
  • Net operating losses (NOLs). Business NOLs can be carried back two years and forward 20 years. Tip: As an alternative, you may opt to forego the carryback and instead carry the entire NOL forward.

Tax planning is essential for second marriages

Wedding bells bring rejoicing – and financial changes. If you’re marrying for the second time, the changes might seem overwhelming. On the surface, tax and financial planning for a second marriage is similar to that of a first marriage.

For example, no matter what month you hold the ceremony, the IRS will consider you married for the full year. That means employer-provided fringe benefits and taxes withheld from your paychecks could require adjustment. Depending on how much each of you earns and your past financial history, you’ll have to decide what filing status will be most beneficial, and how best to take advantage of tax breaks that may become available. [Read more…]

Millions qualify for exemption

According to the Brookings Institution, an estimated 20 million taxpayers will qualify for an exemption from the Affordable Care Act’s penalty for failing to have insurance. It’s not known how many of those who qualify for the exemption will actually claim it. To check the available penalty exemptions, visit the IRS website at www.irs.gov.